Cheaper to Hire in Germany than Spain?

Economics Prof. Morten Olsen compares labor markets

Since the election of Spain's new prime minister Mariano Rajoy, the spotlight has been on issues such as austerity measures and reducing the public deficit. Yet data comparing Spain with Germany indicates the country has other more urgent challenges to address, says Prof. Morten Olsen of IESE Business School's Department of Economics.

Between 2000 and 2008, productivity rates in Germany increased by 13 percent, while in Spain they rose just 5 percent. At the same time, compensation levels for Spanish workers rose by 38 percent, while in Germany these increased by only 14 percent. The combination of these factors means that it is actually cheaper for companies to hire workers in Germany than in Spain, Prof. Olsen argues.